Small Business Tax Flexibility Act of 2005

Small Business Tax Flexibility Act of 2005 - Amends the Internal Revenue Code to allow certain S corporations a one-time election to transfer money or property to a partnership without recognition of gain or loss by the shareholders of such corporation. Treats all distributions of the money or property of an electing S corporation as a distribution in part or full payment in exchange for the stock of such corporation.

Requires transferee partnerships to maintain the continuity of the S corporation's business for five years after the conversion to partnership form or pay a recapture tax in the year in which failure to maintain such continuity first occurs.